Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to Bloomberg
Speaker 1: Business Week with Carol Masser and Tim Stenoveek on Bloomberg Radio.
Speaker 1: We are all in on the FED today, although it
Speaker 1: may not seem like it because of the conflict overseas.
Speaker 2: Kind of amazing right now.
Speaker 1: Any other day, Yeah, Yeah, where we'd be on the Tuesday,
Speaker 1: the first day of a two day policy meeting, we'd
Speaker 1: spend quite a bit of time talking about the food
Speaker 1: or were we.
Speaker 2: Talk about the market? Kind of marking time because it's
Speaker 2: just waiting FED decision. But that's not necessarily been the
Speaker 2: trade today.
Speaker 1: One person we go to regularly for his view on
Speaker 1: the economy and rates around FED decisions is Frank Sorrentino.
Speaker 1: He's chairman and CEO at the publicly held New Jersey
Speaker 1: based community bank connect One Bank Corp. W's the parent
Speaker 1: of Connect One Bank. We're talking small businesses, construction companies
Speaker 1: among its customers. The bank recently merged with First Long
Speaker 1: Island Corp. Which brings its total assets, Carol to about
Speaker 1: fourteen billion dollars.
Speaker 2: All right, Frank is back with us and he is
Speaker 2: in Melville, Long Island. Frank good to have you here.
Speaker 2: We always appreciate getting some time to check in with
Speaker 2: you and see what you are seeing. It's all fast
Speaker 2: and very Carolyn. It's good to have you. Would you
Speaker 2: like to, like just take a long nap and wake
Speaker 2: up and I don't know, twenty twenty six or twenty
Speaker 2: twenty seven, tell us about your world right now and
Speaker 2: what you're seeing, because you you tended to be pretty optimistic.
Speaker 3: Yeah, it's interesting. You know, if you go back a
Speaker 3: couple of months the Liberation Day and you took a
Speaker 3: nap on that day and woke up today, you'd say, well,
Speaker 3: I don't know, things don't look too bad. Other than
Speaker 3: what's going on overseas, the market is pretty much rebounded
Speaker 3: or recovered most of the ground. You know, people feel
Speaker 3: the economy is on more sturdy ground today than they
Speaker 3: thought in those weeks after, you know, after that news.
Speaker 3: But the economy still is quite robust in the markets
Speaker 3: that we serve, as you know. Connect one is in
Speaker 3: the New York metro market in New Jersey, New York
Speaker 3: now Long Island in a pretty big way, and the
Speaker 3: majority over the client base that we have is still
Speaker 3: seeing strong demand for products and services. A lot of
Speaker 3: service oriented businesses. There's still an enormous amount of demand
Speaker 3: for housing, for apartments, for all types of construction, warehousing,
Speaker 3: even office which has, as you know, been you know,
Speaker 3: the subject of you know, a lot of conversation over
Speaker 3: the last two or three years or so, has is
Speaker 3: seeing a tremendous rebound as we're moving, you know, through
Speaker 3: this period of time.
Speaker 1: I'm getting to a few questions from loyal listener Ryan
Speaker 1: Horan reaching out over the instant Bloomberg. He's glad we're
Speaker 1: talking to you because a great check of small business
Speaker 1: and the consumer. He's curious about any worrying trends or
Speaker 1: any pullback in underwriting that you're seeing. Are you adding
Speaker 1: to reserves to shield any non performing loans?
Speaker 3: You know, most banks are reporting that they're seeing a
Speaker 3: fairly benign credit perspective out there. I know there was
Speaker 3: a lot of terror of talk UH sixty days or
Speaker 3: so ago, and a lot of investors were very concerned
Speaker 3: about how tariffs may impact bank earnings, you know, through
Speaker 3: the through the credit cycle, through any sort of credit
Speaker 3: cycle that's really quite diminished these you know, recently in
Speaker 3: the in the past few days or weeks, UH and
Speaker 3: banks are still reporting a fairly benign credit period. There
Speaker 3: are certainly one offs, as we would always expect there
Speaker 3: to be, and there's appropriate reserving going on at most banks,
Speaker 3: but there's nothing systematic that's out there that were where
Speaker 3: banks are feeling that there are particular segments of the
Speaker 3: market that are showing more signs of weakness than than normal.
Speaker 2: Why is that.
Speaker 3: Negative? When we start, I always start with we have
Speaker 3: a four percent unemployment rate. Everyone has a job and
Speaker 3: anyone who's looking for a job can get a job,
Speaker 3: and so things are good. People are getting raised, there's,
Speaker 3: you know, plenty of opportunity in the market. There's been
Speaker 3: an enormous amount of liquidity put in the market over
Speaker 3: the last dozen years or so. That is just driving
Speaker 3: our economy to all time highs. The market is reacting
Speaker 3: to that. You can't buy a car, you get people
Speaker 3: are waiting in line for homes and apartments. Luxury goods
Speaker 3: are on fire. You go to the airport, you can't
Speaker 3: get on a plane. It's the economy. I keep saying
Speaker 3: the economy is robust, and everyone keeps challenging me why
Speaker 3: I use that word. Well, it just is. And so
Speaker 3: all of these things are driving GDP is growing it
Speaker 3: over three three and a half percent. That's what's driving
Speaker 3: what's going on, notwithstanding all the news that you're hearing about,
Speaker 3: you know a lot of global issues and other you
Speaker 3: know political you know craziness that's going on in the marketplace.
Speaker 2: But what do you make you know, we talked the
Speaker 2: retail sector earlier with Dana Tel and we talked about
Speaker 2: everyone trading down. So you're seeing discount retail doing better
Speaker 2: than most airlines pulling guidance it. It feels like there's
Speaker 2: stuff brewing. And I think it's safe to say that
Speaker 2: employers are really gun shy about letting go of workers.
Speaker 2: There is some labor hoarding going on because they remember
Speaker 2: all too well, Frank, what happened after COVID and nobody
Speaker 2: could find workers, right. So I just you know, I
Speaker 2: just wonder if you've seen a lot of economies. I
Speaker 2: know I ask you this all the time, but I
Speaker 2: just do wonder. Are you hearing anything anecdotally where people
Speaker 2: are like, we're a little nervous, and you know these
Speaker 2: tariffs are yeah.
Speaker 3: Yeah, I think we are seeing consumers being a bit
Speaker 3: more price sensitive, and I think they are, you know,
Speaker 3: maybe not spending as lavishly as they might have in
Speaker 3: the past, and they got a little shook up with
Speaker 3: the tariffs, and they're looking at some specific products that
Speaker 3: you know, may have changed in price. There's been some
Speaker 3: hoarding going on that I do think impacted some of
Speaker 3: that consumer spending. I know for a fact that's impacted
Speaker 3: you know, building supplies and building goods. You know, people
Speaker 3: front loaded buying things and anticipation of the tariffs, so
Speaker 3: there's a lot of turbulence going on in the marketplace today.
Speaker 3: My read, however, is though if you strip out you know,
Speaker 3: some of the you know, gas and teraf related items
Speaker 3: out of the consumer spending, you'll actually see numbers were
Speaker 3: actually up a bit, not down. And even what they're
Speaker 3: reporting that that you know, the consumer spending was down
Speaker 3: a bit, it's down less than one percent or something percent,
Speaker 3: So it's not a it's not a seat change that's
Speaker 3: going on. There is you know, some volatility here, but overall,
Speaker 3: I still see I don't I do not see a recession,
Speaker 3: and I still see a fairly robust economy ahead.
Speaker 1: You know, we're talking to you on Tuesday, June seventeenth,
Speaker 1: the day before we hear from FED chair J. Powell.
Speaker 1: We don't know what he's going to say. I think
Speaker 1: I know what he's going to say to some question
Speaker 1: when he answered some questions specifically about politics and his
Speaker 1: own future, because he said those same answers for months.
Speaker 1: But Frank, I'm curious what you see of the as
Speaker 1: the path of the Federal reserve for the remainder of
Speaker 1: the year. Give us your dot plot.
Speaker 3: Well, based on what I just said to you. If that,
Speaker 3: if that in fact is what's going on in the economy,
Speaker 3: then the expectation has to be that the Fed does
Speaker 3: not lower rates because the economy is still quite strong,
Speaker 3: and so my belief would be that you'll see a
Speaker 3: You will definitely see some commentary about the uncertainty that
Speaker 3: lies in the marketplace as we move forward. There are
Speaker 3: lots of things to be uncertain about, you know, tariffs
Speaker 3: being won, the war in the Middle East, the war
Speaker 3: in Ukraine, and how those things are impacting you know,
Speaker 3: gasoline prices, which happen to be down, but you know
Speaker 3: could rise dramatically depending on where things go. So there's
Speaker 3: going to be a lot of things that are inputs
Speaker 3: that the FED will be looking at that will determine
Speaker 3: what's going to happen in the future, and they may
Speaker 3: give some guidance about what they think those things would
Speaker 3: be going forward. The market expects the FED to cut
Speaker 3: at least one, if not two, times this year. I
Speaker 3: believe it'll be closer to one. And be careful what
Speaker 3: you wish for. I do believe that again, this economy
Speaker 3: will continue to roll on and the FED is going
Speaker 3: to have a tough time to lower interest rates as
Speaker 3: we move through this cycle.
Speaker 2: Frank, I do wonder too. You know, this was an
Speaker 2: interesting past earning cycle where we actually did have folks
Speaker 2: give you two scenarios like, if everything's good, here's what
Speaker 2: our numbers will be. If they're not, here's you know
Speaker 2: where they will be, and quite arrange. And I'm not
Speaker 2: saying everybody did that, but it was just for those
Speaker 2: of us who have covered publicly held companies for a
Speaker 2: long time and earn the earning season. I don't remember
Speaker 2: people doing that. I've seen people pulling guidance a lot,
Speaker 2: but not giving scenarios. Do how many I'm curious about
Speaker 2: the conversation do you have with your team. Do you
Speaker 2: talk about a lot of different scenarios in this environment,
Speaker 2: because it could go a lot of different ways, or no,
Speaker 2: you feel much more confident to say this is probably
Speaker 2: the course, and here's why we can make decisions based
Speaker 2: on this course.
Speaker 3: We definitely have those discussions. We're definitely keeping our ear
Speaker 3: close to what's happening. And the thing that I constantly
Speaker 3: bring back to the table is, let's listen to what
Speaker 3: our clients are telling us. And so, you know, it's
Speaker 3: one thing for us to predict what we think is
Speaker 3: going to happen based on facts, figures, whatever, but hearing
Speaker 3: in from our clients and what they're experiencing in each
Speaker 3: of the various segments that we do business with, to me,
Speaker 3: is much more important than any few we may have
Speaker 3: on our own. So we're still hearing that folks in
Speaker 3: general are in good shape. There's a fair amount of
Speaker 3: liquidity still in you know, folks checking accounts and their
Speaker 3: ability to borrow still remains strong. And so we continue
Speaker 3: to see a fairly robust economy going forward. And that's
Speaker 3: what we're modeling for and that's what we're predicting for
Speaker 3: the future.
Speaker 1: Some people say uncertainty. Frank's word is robust. That's the
Speaker 1: word he is over and over again.
Speaker 2: You're existent you've been consistent.
Speaker 3: And uncertainty is is a challenge though, and it is
Speaker 3: impacting you know, people's decision making ability. And so you know,
Speaker 3: one of the things that I always look at and
Speaker 3: always counsel people is, hey, look at what's really going
Speaker 3: on on the ground, and you know, try not to
Speaker 3: get caught up in all the headlines of you know,
Speaker 3: what may be going on around you that don't that
Speaker 3: doesn't necessarily impact you. I've had conversations with clients we're
Speaker 3: talking to me about tariffs, and tariffs don't actually impact
Speaker 3: their business, right, So right, I'm saying, well, okay, why
Speaker 3: are we focused on that? So uncertainty absolutely can change
Speaker 3: the direction of the economy.
Speaker 2: Yep, sentiment can be pretty strong, right, and uncertainty certainly
Speaker 2: plays into something like that. Hey, Frank, as always, thank you,
Speaker 2: Thank you. Frank Sorrentino, chairman CEO at the publicly held
Speaker 2: In Jersey based community bank connect One Bank, or as
Speaker 2: we said, and like to remind you it is a
Speaker 2: parent company of connect One Bank.